Assignment on Microeconomics 5 questions (350 words to each question) Essay

Assignment on Microeconomics 5 questions (350 words to each question) - Essay Example Cost when unoccupied $76.00, Minus dog care $8.00, Minus security firm $10.00 the balance is $58.00. We also consider depreciation that occurs in excess when someone is living in the house, the excess depreciation is $5, so we add the balance above which gives us $58 plus $5 equals $63. On the gardener's services, because the person renting the house takes care of the gardening services his cost of leaving his house unoccupied reduces by $10 therefore we get $63 minus $10 we get $53. The surgeon should reduce his tent by both the value of dog care and need for a security firm because this are taken care by the person living in the house so our value will be 53-18=35. Therefore the minimum amount the surgeon should accept to receive, as rent should be $35. Substitute goods are products that are similar in that they satisfy the same want, if one's good is not available one can substitute it with another example butter and margarine that are consumed with bread. Butter and margarine can be substitutes of one another. Perfect competitive market is a theoretical market structures in which there are many buyers and sellers with no individual power to influence market price. Prices are determined by demand and supplies in the market assumptions of a perfect competitive market are: Many buyers and sellers, Perfect mobility of factors of production, perfect knowledge, homogenous products, absence of externalities. (Hardwick, Khan & Langmead, p 91, 1997). The analysis of equilibrium price and quantity was by Alfred Marshall (1842-1924). He analyzed the demand curve and the supply curve and stated that where the two curves intersect, they give us the equilibrium price and quantity in the market. (Hardwick, Khan & Langmead, 1997). Qo is the equilibrium Quantity Po is the equilibrium price a) Equilibrium price of butter has increased and that the equilibrium quantity of bread has increased. Possible explanations are: I. Price of milk has decreased - If the price of milk decreases then we expect the price of butter to go down. This is explained by the fact that in production of butter, milk is the key input in the process. Therefore, a decrease in the price of butter cannot explain an increase in price of butter. II. Price of flour has decreased - If price of flour decreases we expect price of bread to go down because flour is the key input in production of bread. If price of bread decreases we expect an increase in the quantity demanded of bread. Therefore this explains the increase in equilibrium quantity of bread. On butter - as the bread demanded increases and having in mind that bread and butter are complementary goods. We expect the price of butter to go up also due to increased demand. Demand and Supply Curve for Bread Price Po P1 SSo 0 Quantity The decrease in price of flour causes the supply curve of bread to shift downwards from SSo to SS1 . our